By Tim Bonfield
The Cincinnati Enquirer

The number of Ohioans covered by health maintenance organizations could drop below 2 million next year for the first time since 1994.

"HMO enrollment is way down. Employers are looking at other options," said Allan Baumgarten, a Minneapolis-based health consultant who analyzed HMO enrollment and financial reports through 2002 to produce his annual "Ohio Managed Care Review."

He found the number of HMOs in Ohio, as well as the number of people covered by them, have dropped steadily since 1998.

Still, HMOs remain profitable.

In the late 1980s through the mid-1990s, managed care was the buzzword for health care cost control. And HMOs were the prime example of managed care.

The idea was that costs could be controlled by limiting the number of doctors and hospitals that members could use, requiring approval from primary care physicians to see specialists, and demanding discounts from participating network providers.

In return for limited choice of providers, families paid as little as $5 or $10 for office visits. Hospital bills were fully covered, and many people got generous prescription drug coverage and other benefits.

For a while, the model worked.

In 1997 and 1998, some employers - mostly larger ones - actually saw their annual health care premiums decrease.

But now, after a wave of consumer backlash, few HMOs are so restrictive. Many no longer require pre-approval to see specialists. Some have expanded their networks to include nearly every hospital and doctor in town.

Meanwhile, doctors and hospitals have become far less willing to accept low-pay contracts.

As a result, costs have gone up, and so have the premiums the health plans charge - so much so that HMOs rank among the most expensive coverage options a family can choose, Baumgarten said.

Among his report's findings:

• Of 36 HMOs operating in Ohio in 1996, 20 are still in business. And 57 percent of enrollees are concentrated in the four biggest companies: United HealthCare, Anthem, CareSource and Humana.

• Overall enrollment dropped more than 10 percent from 2001 to 2002, from 2.47 million to 2.22 million. HMO enrollment has dropped more than 23 percent since its peak of 2.9 million in 1998.

Also in recent years, tens of thousands of Ohio seniors have been dropped from Medicare HMOs (more than 13,000 in 2002 alone) as some plans have gone out of business and others have constricted their market areas. Only two companies still provide Medicare HMO coverage in Hamilton County.

• On the financial side, Ohio's commercial HMOs raised premiums an average of 16.8 percent in 2002, which resulted in a 2.4 percent profit margin for the industry. Seven of the eight largest HMOs in the state made money in 2002.

Results for individual health plans varied.

Overall, the profit margins of 2002 were some of the best returns HMOs had experienced in several years. And based on limited reports from the first half of 2003, it appears the profits will stay strong, Baumgarten said.

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E-mail tbonfield@enquirer.com